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February 04, 2009

Bill to Prohibit Reverse Payments Introduced in the Senate

Yesterday, Senator Herb Kohl (D-WI) (at right) introduced the Preserve Access to Affordable Generics Act (S. 369) in the Senate. The bill, which is co-sponsored by Senators Sherrod Brown (D-OH), Richard Durbin (D-IL), Russell Feingold (D-WI), and Chuck Grassley (R-IA), is designed to prohibit brand name drug companies from compensating generic drug companies for delaying the entry of generic drugs into the market.

The bill states that "settlements which include a payment from a brand name manufacturer to a generic manufacturer to delay entry by generic drugs are anti-competitive and contrary to the interests of consumers," and therefore, clarifies the law "to prohibit payments from brand name to generic drug manufacturers with the purpose to prevent or delay the entry of competition from generic drugs." In particular, the bill would add a new section to The Clayton Act (15 U.S.C. 12 et seq.) that would, in part, make it unlawful:

[F]or any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which--(1) an ANDA filer receives anything of value; and(2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time.

A generic drug company found to violate the provisions of the Act would forfeit its 180-day exclusivity period.

When introducing the bill, Senator Kohl stated that it would prohibit so-called reverse payments, where a drug company holding a patent on a brand-name drug pays a generic drug company to forgo marketing its generic version of the drug. Calling such "backroom" payments "one of the most egregious tactics used to keep generic competitors off the market," Senator Kohl noted that S. 369 would "make these anti-competitive, anti-consumer patent payoffs illegal."

According to the Wisconsin Senator, an antitrust case filed by the Federal Trade Commission and the State of California in the District Court for the Central District of California on Monday indicated the urgent need for the bill. In that case, the plaintiffs allege that a 2006 settlement between Watson Pharmaceuticals, Par Pharmaceuticals, Paddock Laboratories and patentee Solvay Pharmaceuticals with respect to patent litigation involving AndroGel(R) 1% (testosterone gel) CIII is unlawful. Senator Kohl called the "pay for delay" settlement in the above case "exactly the anti-consumer, anti-competition agreement that would be rendered illegal by our bill."

S. 369 differs from the bill Senator Kohl introduced in the 110th Congress in that it gives the FTC the authority to exempt settlement agreements that the FTC determines would benefit consumers.